The Bed and Breakfast Battle in Hawaii

Illegal vacation rentals have vexed Kailua and North Shore residents for years. A new city bill purports to solve the simmering issue, but it still won’t be enough. The real problem? The city can’t enforce the current law. We tell you why.

By Tiffany Hill; Photography by Olivier Koning

Published: 2011.09.12 05:00 AM

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illustration: julia minamata

Kathleen Pahinui has lived in Waialua for more than 20 years and has served on the North Shore Neighborhood Board for a decade. She’s helped fight against resort development and rallied for bike-path improvements. But there’s another problem she says is changing the character of the community. “You know these people are breaking the law, you know what’s going on and there’s nothing that can be done. We need to take back our neighborhoods,” she says. You might think she’s talking about meth labs, cockfighting rings or backroom gambling, when, in fact, what she’s fed up with are … illegal vacation rentals. Pahinui estimates there are 400 illicit operations on the North Shore.

On the other side of the island, in Kailua, Sharon Price says there are eight illegal rentals on her street alone. She and her neighbors noticed them a long time ago (Price has lived in the neighborhood for 24 years). Some residents have recorded license-plate numbers and taken incognito photographs, documenting the unlawful activity. Pahinui says they then turn over the information to the city, but officials don’t follow up. In the past, City Council bills to update the law and expand the number of permits allowed have been introduced—most recently in 2009—but none have passed.

For neighborhood advocates such as Pahinui, illegal B&B establishments and transient vacation units (TVUs), such as houses or condos, are real problems the city hasn’t successfully tackled in decades. “If someone is breaking the law, they should pay the consequences,” she says. “Right now there are no consequences.”

The city Department of Planning and Permitting (DPP), the office tasked with overseeing the regulations, has been shoddily enforcing the law for years and, as a result, the number of illegal rentals has skyrocketed. The lack of enforcement also stunts what could be a more viable alternative to Oahu’s traditional tourism model, especially given a recent assessment by Richard Lim, the new director of the state Department of Economic Development and Tourism, who stated that tourism “has been essentially flat for decades.”

Every year, tens of thousands of tourists seek homelike accommodations, whether on Oahu, Kauai, Maui or the Big Island. There are 826 legal TVUs and only 49 legal B&Bs on Oahu, not even 1 percent of the island’s 25,500 hotel rooms. The city’s failure to effectively implement the 22-year-old regulations also means that it loses out on hundreds of thousands of dollars in fines every year, as well as tens of thousand of dollars in taxes and fees if more B&Bs were to be legalized. It all starts with enforcement, however, something the city seems to be acknowledging. In August, DPP officials started working toward introducing a new City Council bill this fall that could make it easier to bust illegal rental owners. In the meantime, neighborhood advocates stand united against proposals calling for B&B expansions, while some legal B&B owners are tired of having their legitimacy questioned.

Kathleen Pahinui wants to see all of the illegal vacation rentals shut down.

What’s the Law?

In 1989, the city implemented a law to regulate and tax B&Bs. Owners who were already operating were given nonconforming-use certificates, which allowed them to keep running their B&Bs, but with new restrictions. They could only rent out up to two bedrooms in their homes for fewer than 30 consecutive days. Owners pay $200 annually for their B&B certificates, and $200 per bedroom every other year when they renew their licenses. Vacation rentals fall under a separate 1986 law, which allows owners to rent out their properties for less than 30 days, hence the vacation designation. The TVUs are only legally allowed in resort districts, such as Ko Olina or Turtle Bay, and in Waikiki. The biggest difference between a B&B and a TVU is the owner’s presence: B&B owners are supposed to live in the house whose rooms they rent out.